In a curious way, the brinksmanship practised last week by U.S. President Donald Trump over the North American Free Trade Agreement should pay off for Canada.
When we look at what happened when Trump took control over the softwood lumber file — last week, he enacted an average import duty of 20 percent — steering NAFTA away from his erratic disposition and placing it in the hands of capable negotiators will allow both sides to grasp the nuances and ramifications of any changes. (Does Trump understand that he just made building and renovating houses more expensive for Americans?)
NAFTA has been simmering since Trump took power, with the president threatening throughout his campaign and last week to pull out of the agreement. He apparently backed off from an executive order doing just that after talking to Mexican President Enrique Pena Nieto and Prime Minister Justin Trudeau. By bringing the issue to a boiling point, Trump was forced to make a decision to back off and let the negotiators take over.
That is a good development.
It should also be noted that country-of-original labelling laws in the United States — which the World Trade Organization agreed have cost the Canadian livestock sector $1 billion annually — is another area of concern. Having won the argument at the WTO, which resulted in COOL being repealed in December 2015, Canada faces another battle with Trump.
A lot of Republicans will never accept pulling out of NAFTA. Trade between the three countries totals $1.1 trillion annually. Agricultural trade between the U.S. and Canada is $47 billion.
Agriculture Canada says every $1 billion the U.S. exports in that sector supports almost 7,600 American jobs and $1.2 billion in economic activity. U.S. Census Bureau numbers show that Canada is the top export destination for 35 U.S. states.
Agricultural and agri-food trade between the U.S. and Canada has tripled since NAFTA was enacted in 1994, resulting in specialization and integration of supply chains. U.S. feedlots and meat packers rely on Canadian livestock, and U.S. crushing plants need oilseeds from Canada. American and Canadian companies sell their agricultural machinery across borders.
U.S. negotiators will be aware of all of this, even if the president isn’t.
The trade issue has blown up because of an oversupply of milk in the U.S. and a change in Canadian policy affected Wisconsin dairy farmers. Trump reacted as he does, capriciously, without knowing the details — that the U.S. dairy trade surplus with Canada is $400 million. Now, Canada’s supply management regime — which governs dairy, poultry and eggs — is under pressure again.
Canada has shown an inclination to address international concerns over supply management. Under the now defunct Trans-Pacific Partnership, Canada was prepared to allow limited international access to our dairy market (3.25 percent), while compensation of $4.3 billion was provided to dairy producers. That, in turn, allowed Canada to negotiate more favourable terms in other areas of trade in the TPP.
That may happen again, but supply management will survive these talks. It has always survived trade negotiations; the only difference now is that there is a boisterous voice in the White House.
Trade policy will remain a domestic issue. Given that the leading candidate for the Conservative party leadership, Maxime Bernier, is in favour of ending supply management, and that Trudeau has spoken in favour of retaining it, that debate will take place in Canada. Ultimately, the decision on whether to end supply management, if that ever comes, will be made by Canadians.
Bruce Dyck, Barb Glen, Brian MacLeod, D’Arce McMillan and Michael Raine collaborate in the writing of Western Producer editorials.